Nailing Down Foreclosure Fixes

Nancy Pollard, MBA 84, believes she has found a new,
more consumer-friendly fix to
the real estate crisis. Pollard is
executive vice president of Impac
Funding Corp., a mortgagebacked
securities issuer, which
found itself stuck with a large portfolio
of home mortgages when
the real estate market blew up.

Rather than taking large
losses on foreclosures, Pollard
has helped devise a new way to
modify loans that she believes
is the most advantageous to
homeowners today. It’s called
a SAM, or shared appreciation
mortgage. Impac completed its
first SAM in May.

It works like this: Say a
homeowner owes $500,000
on his mortgage. But the home‘s
value sinks to $200,000 and the
homeowner can‘t afford his loan
payments. Instead of foreclosing
and losing more than $300,000,
Impac drops the principal balance
to $300,000 -- after determining
that‘s the most the homeowner
can afford -- and creates a SAM
out of the $200,000 balance.

If the homeowner keeps the
house a long time and sells it for
$1 million, Impac gets back its
$200,000 from the SAM plus
5 percent for each year it held
the SAM. If the house sells for
only $400,000, Impac splits
50-50 the $100,000 above the
$300,000 first mortgage.

The 5 percent cap on Impac’s
gains is uniquely consumerfriendly,
but Impac still enjoys
the potential to recover its loss,
Pollard says. Equally important,
consumers keep their homes.